Abbott Wins Ruling On Overtime Pay For Reps
November 28th, 2011 // 1:14 pm @ jmpickett
In yet another twist in the back-and-forth legal battle concerning overtime pay for sales reps, a federal court judge has ruled that a former Abbott Laboratories rep is exempt from relevant provisions of the Fair Labor Standards Act and, therefore, should not be paid overtime.
The ruling is the latest to underscore a split between the courts on the issue, which has galvanized many sales reps as they attempt to win back wages from drugmakers that are furiously slashing costs. Last year, the US Court of Appeals for the Second Circuit ruled that Novartis reps are entitled to overtime, but the US Court of Appeals for the Ninth Circuit ruled against two GlaxoSmithKline reps, who are seeking a review by the US Supreme Court (see here and here).
The FLSA discusses two exemptions. The overtime compensation requirement does not apply to employees who work as outside salespeople, but the law does require employers to pay overtime for hours worked beyond 40 hours a week, unless an exemption applies. What are those exemptions? If an employee’s primary duty is to obtain orders or contracts (as defined by the statute) and regularly does so away from the employer’s place of business.
There is also an administrative exemption, which relieves employers from paying overtime to any employee who is employed in a bona fide executive, administrative, or professional capacity – and to employees earning over $455 a week whose primary duty is to perform office or non-manual work involving managerial or general business matters. A primary duty includes exercising discretion and independent judgment.
A federal court recently ruled against Merck on this point (look here), but the judge deciding the Abbott case took the opposite view. In a 13-page ruling, US District Court Judge C. Darnell Jones wrote that Abbott correctly paid the reps as overtime-exempt administrative employees because they engage in considerable “business planning†activities.
In reaching his decision, he cited the deposition from Abbott rep Gerald Ibanez, who acknowledged that “representatives’ ability to develop strategies; to approach, communicate, and cultivate relationships with physicians; and to operate without constant supervision in the field†underscores his belief that reps are exempt from the FSLA administrative provision, Jones wrote in his ruling.
“These activities also are consistent with relevant definitions of exempt administrative work because they affect defendant’s business operations to a substantial degree, and involve sales and promotional work on behalf of defendant that reflect the exercise of discretion and independent judgment with respect to matters of significance,†he concluded (here is the complete ruling).
In an attempt to persuade the Supreme Court to clarify the confusion, the attorneys for the Glaxo reps wrote in their brief that “the question of whether the exemption applies to (reps) is one that affects the operations of an entire industry, not just the specific parties in this matter. This is a question of national application.â€
Meanwhile, the US Department of Labor has sided with pharma sales reps in various court filings, and lawyers for the Glaxo reps argue that the differing court rulings leave unanswered the extent to which the courts should give deference to the interpretation of federal law by a federal agency. The Supreme Court is expected shortly to reveal its decision on whether or not to review the issue.
